Bridging the Financial Gap with Mobile Wallets
Part 3 of the Speak Out Series: Analyzing the Potential of Mobile Wallets to Provide Financial Access to the Unbanked
In the previous part, we looked at the data visualization of the world’s unbanked, saw how they are dispersed throughout the world, and also analyzed the number of the unbanked who own a mobile phone. The purpose was to explore digital solutions like mobile money/wallets that can bridge this gap in financial inclusion. This section will look at the popular mobile wallet apps in the developing world and see how they have been able to provide more than transaction services to build their customer base.
The recent mobile wallets boom
According to GSMA’s 2021 report, the number of registered mobile money accounts in 2020 grew by 12.7 percent globally to 1.21 billion accounts– double the forecasted growth rate. The fastest growth was in regions where governments provided significant COVID-19 pandemic relief to citizens. Account activity grew at an even faster rate- over 300 million monthly mobile money accounts were reported to be active globally [1].
Allowing mobile financial services to thrive is one of the many actions taken by countries that have made the most progress toward financial inclusion [2]. As lockdowns and social distancing measures were implemented to combat the spread of COVID-19, the digitalization of financial services became increasingly significant. According to the Global Findex database, nearly 1.7 billion people are still unbanked, even though two-thirds of them own a mobile phone that could help them access financial services [3].
The emergence of COVID-19 has elevated the importance of digitizing payments more than ever before, and for this to be a success, electronic payments must offer similar benefits to cash [4]. One of the contactless payment methods is using digital wallets on smartphones or wearable devices, such as Apple Pay or Alipay.
Many people, particularly in developing countries, may now participate more fully in the global financial system thanks to digital wallets. These wallets enable participants to receive funds or remittances from friends and relatives in other countries, as well as accept payments for services rendered. Because digital wallets do not require a bank account with a physical firm or branch, they can easily be used by those living in poorer and rural areas, allowing for wider financial inclusion [6].
Some successful digital wallet services in developing countries
M-Pesa has been the very first system to embrace mobile payments in developing countries. M-Pesa is a mobile money service run by Vodafone and Kenyan telecommunications provider Safaricom. It enables millions of people who have access to a mobile phone, but do not have or only have limited access to a bank account to use payment and financial services. It now operates in over 7 African countries and has reported having over 49.7 million customers. M-Pesa’s success is a combination of the right technology, an efficient and effective business model, with the right decisions from the Kenyan government to allow the system to operate without applying heavy regulations or high government fees on every transaction [7], [8].
Paytm is India’s largest mobile payment service platform used by over 300 million Indians. After the Indian government announced the demonetization of currency in 2016, Paytm’s growth accelerated dramatically. The government’s commitment to promoting digitization in the economy, notably the financial sector, was also a contributing factor to Paytm’s success [9]. Paytm Payments Bank will be India’s first bank with no online transaction fees, no minimum balance requirement, and a free virtual debit card. Users will be able to open a savings or current account with Paytm in addition to utilizing the wallet and will have access to a number of financial services offered by its partner banks, such as insurance, loans, and mutual funds [10].
In Part 4, let’s analyze GSMA’s latest data and see if this rise in mobile wallets is limited to the developing world or if the trend is equally popular all around the world. We’ll also compare the percentage of mobile money users with the total population in each world region to see the adoption rate. The purpose of this analysis is to show which regions have the highest mobile money adoption rate and how the traditional banks and fintech companies benefit from this trend and offer consumer-centric products and services in these regions.
